A New Kind of Cap and Trade

American Forests has closely followed developments in the carbon trade market. We celebrated when our Cuyamaca Rancho State Park reforestation project was recently accepted by the Climate Action Reserve as a project that can issue Carbon Reduction Tons in California’s carbon market. We’ve also taken a keen interest in the relationship between urban forests and the carbon market. In fact, last summer, we co-sponsored a workshop on “Carbon Offsets & the Urban Forests” at the University of California, Davis.

Aerial view of the Amazon, the world’s largest rainforest. Credit: CIAT International Center for Tropical Agriculture

So, naturally, I was excited to read about how the success of carbon markets has inspired a new environmental assets trading program — one with the potential to incentivize the conservation of the world’s largest rainforest. The Amazon is home to 10 percent of the world’s terrestrial biodiversity and produces 20 percent of Earth’s oxygen. Approximately 25 percent of modern pharmaceuticals are derived from Amazonian plant life, yet it’s estimated that only about one percent of that plant life has even been tested for pharmaceutical potential. In short, this rainforest is an important resource to all people, no matter their proximity to it. And now, it’s just become easier for landowners in Brazil to embrace its conservation.

Last Monday, BVRio — for Bolsa Verde, meaning “Green Stock,” Rio — launched in Brazil. A nonprofit with government input, BVRio facilitates the trade of many environmental assets, but the one that is garnering the most attention is the trade of native vegetation quotas.

Under Brazilian law, landowners must preserve a certain percentage of their land as native vegetation, also known as a “forest reserve.” The percentage varies depending upon the given ecosystem. Previously, a landowner who had cleared too much land was responsible for replanting areas to make sure he hit his forest reserve percentage, even though he may have no expertise in the skills needed to do so effectively. Under the new environmental assets trading program, the same landowner can meet the forest reserve requirement by going online and purchasing a corresponding amount of land of a similar ecosystem from a landowner with more than the required acres.

There are approximately five million private rural properties in Brazil, and it’s estimated that nearly four million of them do not currently meet the forest reserve requirements. It’s easy to see how this new market could soon be worth billions. Under the quota trading system, a tree’s monetary value while it’s standing could be higher than what it would be worth as timber or corresponding agricultural land.

BVRio has only a week of operation under its belt, but with so much potential to serve as a model for endangered forests around the world, I, for one, will be watching with interest to see how things unfold.